Grain Spreads: Report Thoughts

Sean Lusk General Commentary Leave a Comment

Commentary

Another week brings another change in the balance sheet for both corn and beans. The results are that a big crop just go bigger per USDA. Ending stocks for beans pegged at 320 million bushels and 20 million over the pre trade estimate, while corn came in at 1.500 billion, up from 1.408 last month. USDA raised yield in Soybeans to 51.5 and Corn to 176.5. We are at key levels for Corn in my view. The last three months has rewarded anybody buying between 5.00 and 5.10. One has had the opportunity to sell at higher prices all Summer and early Fall when the market has traded down here. Is this time different? Harvest pressure could be increasing. USDA yesterday reported 41% of the U.S. corn crop was harvested as of Oct. 10, up from 29% a week earlier and above the average for the previous five years of 31%. We settled below a key trendline in my view today. See charts below. First the daily and then the weekly. Producer selling may become active here. I’m aware of increased input costs for corn as well as a potential La Nina entering into South America. Those events in my view will be traded in the weeks and months to come, but for now the markets focus or psyche may have changed. First, the idea that a big crop got bigger was verified by USDA. Second,  that farmer selling may emerge as more of a force, potentially pushing the market to 4.96, the next level of key support. (Weekly Chart) If that doesn’t hold, I see the market pressing down to the 4.78/4.84 area. There is a gap at 4.78 on the daily chart included. The market held trend line support on the daily today, but in my view, Corn gets slippy under 4.96. For Corn to hold, I think it needs wheat to hold in here. Beans have a whole new feel in my view with ending stocks at 320 million bushels versus of 150 a few months ago. That’s a dramatic shift here in my opinion where soybeans are demand dependent now. That said, increased demand of palm and soy oil which again was supported on dips this week is telling. The energy sector may hold the keys and raise all boats down the road here. In my view, trade the charts. 

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Daily Corn
Weekly Corn

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Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

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